Stepped labyrinth seals are used in multiple locations in the gas turbine with the intent to reduced leakage compared to straight labyrinth seals. However the selection of geometric factors in stepped labyrinth seals is critical to allow lower leakage in its operating envelope. Particularly the step height and axial position during the running condition play a vital role. The influence of these factors on the leakage, swirl development and windage heating in stepped labyrinth seal has not been thoroughly investigated in the previously published work. This paper focuses to study above effects with numerical simulations in a smooth four-fin stepped labyrinth seal. Specifically, a 2D axi-symmetric computational fluid dynamics (CFD) model is developed utilizing commercial finite volume-based software incorporating the standard k-ε turbulence model. Using this model, a broad parametric study is conducted by varying step height, axial position of the knife from the step, radial clearance and pressure ratio for a four-teeth stepped labyrinth seal. It has been observed that the seal leakage reduces with increase in step height to pitch ratio up to 0.35 and with further increase it tails off. The axial position of the tooth has strong influence on the flow structure and swirl development in the seal pocket.